Ahead of the Bell: Feb. US auto sales seen rising

AP News
Posted: Mar 01, 2011 8:13 AM
Ahead of the Bell: Feb. US auto sales seen rising

When February U.S. auto sales are released on Tuesday, people in the market for cars and trucks will see whether sweeter deals are making a comeback.

Carmakers for the past year have been trying to sell cars and trucks on the quality and styling of their vehicles, not on how much they knock off the sticker price. The companies, mainly Detroit automakers, have downsized enough so they no longer need to sell cars at discounts just to keep the factories running.

But February could show signs that the strategy is shifting as automakers try to gain a bigger slice of a growing market.

The automotive website Edmunds.com and J.D. Power and Associates predict that overall industry sales will rise 20 percent from February of last year. General Motors Co. and Toyota Motor Corp. will lead the gains.

Edmunds says GM spent a lot on incentives in February, leading the industry with an estimated $3,857 per vehicle last month. GM's incentives in Oct. 2009 _ a terrible year for auto sales _ hit $4,100 per vehicle, according to car buying information serviceTrueCar.com.

With February incentives, GM sales will rise 37 percent over the same month last year, Edmunds predicts

GM executives say they're using incentives to gain sales in some areas of the country and in some segments of the market, but they don't plan big discounts the rest of the year.

"GM clearly is making a grab to maintain market share," says Edmunds senior analyst Michele Krebs. "It towered above its competitors in February incentive spending."

GM in January boosted incentives such as rebates and low-interest financing by an average of $400 per vehicle from December levels. It gained 1.2 percentage points of market share, grabbing 21.8 percent of U.S. sales, according to Autodata Corp. The boost left many in the industry wondering if GM would continue the discounts and if other automakers would follow and touch off a price war.

So far, it doesn't look like other companies are responding, at least not according to Edmunds' estimates for February. It pegged the average incentive per vehicle in the U.S. at $2,530, down 1.2 percent from January.

The other big gainer for the month should be Toyota. Edmunds predicts a 29 percent sales increase for the company. But last February saw poor sales for the Japanese automaker as it struggled with a string of embarrassing safety recalls. Toyota sales fell 9 percent that month even though it boosted incentives to counter the troubles.

Toyota had another big safety recall last month for gas pedals that can get trapped in floor mats or carpeting.

Ford Motor Co. should see only a 7 percent gain. The rise isn't as impressive as last year, because Ford notched big gains in February 2010, when strong sales to fleet buyers, such a rental car companies, as well as robust sales to individual buyers, helped sales.

Overall, the slow recovery in U.S. auto sales that began in the fourth quarter continued in February. J.D. Power predicts sales of 933,000 cars, SUVs and pickups, fueled by strong sales to individual buyers rather than corporations, a sign of growing consumer confidence.

J.D. Power expects the annual sales rate for February, adjusted for seasonal variations, to be around 12.6 million vehicles. That's about even with January's rate.